Dunkin' to Start Testing Delivery with Grubhub

The chain has seen its same-store sales growth stall and is looking at delivery as a possible answer.

Daniel B. Kline
Daniel B. Kline
Feb 8, 2019 at 8:16AM
Consumer Goods

Dunkin' (NASDAQ:DNKN), back when it was called Dunkin' Donuts, used to tout the idea in its commercials that it was "worth the trip." In fact, back in 1980, the chain's marketing was built around a jingle that touted how customers had to come into its stores in order to try its products.

Dunkin' Donuts, you can't buy 'em in a grocery store. Dunkin' Donuts, you can't buy 'em in a bakery. Dunkin' Donuts, they're not for sale in a restaurant. ... you have to get 'em at Dunkin' Donuts, it's worth the trip.

Of course, back then, the menu consisted of little more than coffee and doughnuts -- there were no espresso drinks, bagels, or even flavored coffees. Now, the company has a vastly expanded menu and it no longer requires customers to come into their stores to get it. The chain, which already has a delivery deal with DoorDash in some markets, will be testing delivery with Grubhub (NYSE:GRUB)

A Dunkin' coffee

Some customers can get Dunkin' coffee via delivery. Image source: Dunkin'.

What is Dunkin' doing?

The chain isn't dropping DoorDash which delivers for it in parts of New York and New Jersey, and in the cities of Atlanta, Boston, Chicago, Dallas, Los Angeles, Miami, and Washington D.C. It is, however, testing a relationship with Grubhub which comes with some technical and operational advantages, according to CEO David Hoffmann's comments in the company's fourth-quarter earnings call.

"We are thrilled to announce that we're partnering with Grubhub for a delivery pilot that integrates directly with our POS [point of sale] or cash register system," he said. "Grubhub is No. 1 in the delivery space, and we're excited to add them to our list of high-quality partners. We're starting with a small alpha pilot and will look to expand to a larger-market test in the near future."

Hoffmann did not define how large the trial would be. COO Scott Murphy did tell Nation's Restaurant News that "we will soon see that start to scale larger as we finish the alpha and beta tests."

Before that happens Dunkin' plans to improve its app and make it easier for customers to use. That process is already under way, according to Hoffmann.

"We completed two app refreshes last year and will continue to simplify the on-the-go ordering process," he said. "There is tremendous power still to be tapped from our digital platform, with mobile orders at 3% of transactions. And, with the card-free acquisition, we can be faster to market and more flexible with our digital initiatives."

The chain plans to continue testing new features throughout the year.

Check out the latest Dunkin' earnings call transcript.

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Why is Dunkin' doing this?

With rival Starbucks ramping up its delivery efforts and Panera already having a robust offering in that area, you can argue that Dunkin' needs to keep pace. In addition, the recently renamed chain produced flat same-store sales in the fourth quarter and only posted a 0.6% gain for the full year.

Properly integrated delivery should help bring those numbers up. If done well, delivery can add sales volume without slowing service for customers who actually visit the store. That's a challenge to pull off operationally, which may explain why Dunkin' will be taking this partnership slow, at least at first.